Financial Services Bill

Amendment 29 would give the Bank of England a list of factors to which it must have regard when considering its financial stability objective. These three factors are identical to those set out for the Financial Services Authority by Clause 5. They are the economic and financial consequences of instability for the UK, any effects on economic growth of the FSA’s stability-enhancing measures and any impacts of overseas events or circumstances on UK financial stability. I understand why the noble Baroness might think that it is sensible for the FSA and the Bank of England to have their financial stability objectives framed in precisely the same way. However, I will explain why this is neither necessary nor appropriate. The amendments to the Financial Services and Markets Act proposed by the Bill follow the existing style of that Act. As noble Lords are aware FiSMA sets out a detailed legislative framework by which the FSA must operate. Section 2(3) of the Act lists a number of matters to which the FSA must have regard. The list of factors to which it must have regard when pursuing its financial stability objectives have been drafted to be consistent with this approach. FiSMA currently focuses on providers and consumers of financial services and does not mention taxpayers or the wider economy. The style of FiSMA offers no flexibility on the FSA’s objectives and "have regard to". The list inserted by new Section 3A(3) in Clause 5 requires the FSA to consider these wider factors when undertaking its detailed statutory functions and operations. The Bank, on the other hand, is generally not constrained in the same way. Although the Bank of England Act 1998 goes into some detail it is not the case that all the Bank’s operations are set out in detailed statute. For that reason, the Government do not believe that it is appropriate to give the Bank the same parameters as the FSA for its financial stability objective. The Bank and the FSA have different roles and different tools. Until the financial crisis, the FSA was focused on micro-level regulation. We are now giving it a wider set of factors to consider, but the Bank has always had a wider macroeconomic approach. I agree that it should consider the factors set out in the new clause to the extent it judges appropriate, but it can already do so. In contrast, it is an extension of scope for the FSA to be asked to look beyond the narrowly defined financial services sector. I hope that I have explained why the proposed new clause is not necessary and urge the noble Baroness to withdraw her amendment. I now turn to Amendment 32, which would include specific provision such that where the Bill refers to "the UK financial system", it means the same as, ""the financial systems of the United Kingdom"," as in the Banking Act 2009. That expression is not defined in the Banking Act but is used in a number of places, mainly in Part 1 in relation to the special resolution regime. Under normal principles of statutory interpretation as set out in the Interpretation Act, words in the singular include plural and vice versa unless the contrary intention appears. Accordingly, we do not consider that there is any need to include a provision in the Bill along the lines of the amendment that has been tabled. I therefore ask the noble Baroness not to press it.